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Top of the Morning

Central bankers considered the extent to which they need to worry about the march of the machines 10 days ago at the Kansas City Fed’s annual economic conference in Jackson Hole, Wyo. The message they heard from the labour market expert invited to address the subject: relax. “People overstate the degree of substitution between machinery and people and fail to recognize the complementarities,” David Autor, an economics professor at the Massachusetts Institute of Technology, told me in an interview after his closed-door presentation at Jackson Hole.

Prof. Autor is somewhat mocking of the fretful tone of much of the more recent analysis of automation. The paper he wrote for the Jackson Hole conference notes that technological advances have been upending labour markets since the Industrial Revolution. Change is disruptive. Yet, “short-term employment losses sparked by rising productivity were eventually more than offset by subsequent employment gains – in some cases in the innovating sectors, in many cases elsewhere,” professor Autor wrote.

On the Homefront

TSX 60 futures are moving lower ahead of the open after the composite index took a hit on Thursday as gold miners cratered.

The loonie is staying strong, hovering just below 0.92 against the greenback this morning.

It’s jobs day in Canada. At 8:30 a.m. (EDT), Statistics Canada will release the results of August’s Labour Force Survey. The consensus estimate is for net job growth of 10,000 for the month, on the heels of July’s addition of 41,700 jobs, with the unemployment rate holding steady at seven per cent. As these monthly jobs figures are notoriously volatile, it’s best to take a look at the broader trends. “We should see the six-month average trend in employment slowly creep higher from the 11,000 pace it tracks now to something closer to what we’re forecasting for August [22,000] as we finish off the year,” writes CIBC economist Nick Exarhos. Statistics Canada fervently hopes it avoids a repeat of July’s jobs debacle, which saw it release erroneous figures followed by a revised print a week later. After a review of the incident, the national statistics agency published a report that explained how and why this error occurred.

Northern Gateway to be more pricey, less timely. At a presentation on Thursday, Northern Gateway president John Carruthers said the potential for the pipeline to begin operating in 2018 is “quickly evaporating.” The company must engage with First Nations groups and reach agreements that are palatable to both sides. Carruthers also told the Business News Network that this project is likely to cost more than the current estimate of $7.9 billion. An updated estimate will be provided by the end of the year, he said. These revelations weighed on shares of Enbridge (ENB), which gave back 0.5 per cent on Thursday.

Energy producer plans IPO. According to the Globe and Mail‘s Jeffrey Jones, privately held Seven Generations Energy plans to go public within the next eight weeks. Citing sources familiar with the situation Jones writes that the company’s initial public offering could be worth up to $1 billion. Seven Generations, which produces 24,000 barrels of oil equivalent per day in Alberta, is said to have selected Peters & Co. and RBC Dominion Securities to be the bookrunners for this IPO.

Exodus of executives at major gold miners. On Wednesday, news broke about a pair of high-profile retirements at two of Canada’s biggest banks; the next day, reports surfaced about two executive departures from the TSX’s two biggest gold miners. Barrick Gold’s (ABX) Sybil Veenman, senior vice-president and general counsel, will be out the door at the end of the month. In August, the world’s largest gold producer decided to eliminate its corporate development team, a signal that continued cost-cutting, not the search for acquisition targets, remains the order of the day at Barrick. Meanwhile, Goldcorp (G) is beginning to look for a replacement for Timo Jauristo, its former executive vice-president of corporate development, who is no longer with the firm, which the company confirmed to the Globe and Mail‘s Boyd Erman.

Canadian productivity poised to rise in Q2. Along with the monthly jobs report, Statistics Canada will also release figures on Canadian productivity growth for Q2 at 8:30 a.m. Corporate Canada didn’t open its wallet for industrial machinery and equipment over the course of the quarter, which doesn’t bode very well for a pick-up in productivity. However, Bank of Montreal chief economist Douglas Porter has argued that the combination of low employment growth and robust GDP growth implies that productivity growth was actually rather solid. BMO projects that labour productivity will rise 1.6 per cent in Q2. Though oft-bemoaned Canadian productivity growth has lagged America’s, it’s worth remembering that the substantial appreciation of the loonie over the past decade is the prime culprit for Canada’s increase in unit labour costs relative to the United States’, and therefore its decline in competitiveness. The rebalancing of growth towards exports is expected to help boost Canadian productivity going forward as it is more capital than labour-intensive, according to TD economists Randall Bartlett and Derek Burleton.

Daily Dispatches

Mario Draghi brought out the proverbial bazooka on Thursday morning, as the European Central Bank cut a variety of short-term interest rates and announced that it will soon begin to purchase an array of asset-backed securities. These measures were introduced in the wake of persistently low levels of inflation, falling inflation expectations, and meagre growth across the eurozone. “Mario Draghi has confirmed his stature as a central banker who delivers and lives up to what is expected of him, and more,” writes IG chief market strategist Chris Weston. “The ECB has cut conventional monetary policy as far as it can go … in the absence of full-blown QE, Mario Draghi’s measures are about as aggressive as they could be at this stage.”

It’s also jobs day in the United States. Economists are looking for net non-farm payroll growth of 230,000 in August, with the unemployment rate edging down to 6.1 per cent. Though Canada’s labour market remains stronger than the United States’, broadly speaking, job growth in Canada has hit a standstill, while the continued firming of the labour market south of the border entails that our neighbours are continuing to make up ground. “Labour markets are making faster headway than the Fed expected, with the unemployment rate dropping more than a percentage point in the past year, alongside notable declines in the duration of joblessness and the number of part-time workers for economic reasons,” writes Bank of Montreal senior economist Sal Guatieri.

Keep an eye on Japan this Sunday evening. The island nation is scheduled to release data on the current account for July, growth in bank lending during August, and its final reading of Q2 GDP, which contracted by a significant amount following the implementation of a sales tax hike in April.

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